How to Complete Form 941
The IRS uses Form 941 to determine how much an organization has withheld from its employees’ wages each quarter. There are specific regulations, requirements, and exceptions when filing this form. Here’s what you need to know about Form 941, including how to correctly fill it out and file it.
What is Form 941?
Form 941 is the quarterly federal tax return for employers. It indicates how much income tax, Social Security tax, and Medicare tax that an employer withheld from its employees’ paychecks in the previous quarter.
Download a blank Form 941 here.
What to Include in Form 941?
Form 941 is to be filed on a quarterly basis and is to include the following:
- Paid wages.
- Any tips reported to you.
- All federal income tax that you withheld.
- Employer and employee share of Social Security and Medicare taxes.
- Any further Medicare taxes that were withheld from employees.
- Your current quarter’s adjustments to Social Security, Medicare taxes (even fractions of a cent), sick pay, tips, and group-term life insurance.
- Any qualified small business payroll tax credit used for increasing the research activities of the business.
- Any credits for COBRA assistance payments.
- Total amount of advances received from filing Form 7200 for that quarter.
Form 941 should not be used for reporting unemployment taxes or any withholdings on payments that are not on the payroll. These would include pensions, gambling winnings, or annuities.
Who is Responsible for Form 941?
According to the IRS, any person or employer who pays wages that are subject to the withholding of federal income tax, Medicare taxes, or Social Security is required by law to file the Form 941. Once you have filed the first form, you must continue to file each quarter, even if you have nothing new to report. The only exception is if you have chosen to file a final return or if you have a qualifying exception. Exceptions are a set of rules that will apply to specific employers. They include:
- If you are notified to file Form 944, then you will not need to file Form 941.
- If seasonal employers claim no tax liability for a specific quarter, then they will not need to file Form 941 for that quarter. For the quarters you do file, be sure to check box 18a to indicate to the IRS that you will not file the form for a specific quarter.
- Typically, employers of household employees will not file Form 941.
- If an employer employs agricultural labor, then they will not file Form 941 for those workers.
When is Form 941 Due?
You will need to file Form 941 for the first quarter in which you will pay Social Security and Medicare taxes or are subject to federal income tax withholding. From here, you must file for each quarter thereafter, or every 3 months. This is required even if there are no taxes to report. The only exceptions are listed above under “qualified exceptions.”
You will only file this report once during any specific quarter. If you choose to file electronically, do not also file a paper copy.
The due date for Form 941 is the final day of the month that follows the end of the quarter. The quarters are listed as:
- January-March (final date to file: April 30th)
- April-June (final date to file: July 31st)
- July-September (final date to file: October 31st)
- October-December (final date to file: January 31st)
The only exception to this rule per the IRS is “If you made timely deposits in full payment of your taxes for the quarter, you may file by the 10th day of the 2nd month that follows the end of the quarter. For example, you may file Form 941 by May 10 if you made timely deposits in full payment of your taxes for the 1st quarter.”
What to Know Before Filling Out Form 941
Before completing the form there are a few important things to note.
- First, be sure and mark the correct quarter at the top of Form 941, and always use 10-point Courier font if possible, when typing or using an electronic means of filing the form. If filing from the IRS website, there will be fillable fields with the correct font specifications.
- Never enter symbols such as dollar signs or decimal points. Commas are considered optional. There will be a preprinted decimal point on the form. Write dollar amounts from left of the decimal to the right. Even if there are no cents, you will still write .00 for the specified cents. Never round dollars on Form 941.
- (Aside from lines 1,2, and 12) Leave blank, any field with a value of zero.
- If applicable, enter negative amounts by including a minus sign. If not feasible, use parenthesis.
- Enter your Name and Employer Identification Number (EIN) on all pages.
- Be sure and enter your name, EIN, “Form 941,” and the tax year on all included attachments.
- If using multiple sheets, be sure and staple them in the upper left hand corner.
- You must complete all 3 pages in order to correctly file Form 941. Failure to do so could delay the processing period of your return.
How to Fill Out Form 941
The following is a step-by-step guide to completing your Form 941 correctly:
- On line 1, you will need to mark the total number of employees whom you paid as a part of that quarter.
- Then, drop down to line 2 and list the total compensation paid out to each employee during the quarter.
- Line 3 is where you will indicate the amount of income that was withheld from your employees paychecks for the quarter.
- You will then enter into line 5a the total amount that was subject to Social Security taxes. This goes in Column 1 and is then multiplied by .124 as indicated on the form. The result should then be entered into Column 2.
- For any employees receiving tips, this process will need to be repeated on line 5b.
- Line 5c is for the total amount that is subject to Medicare tax. Mark the amount in Column 1 and then multiply it by .029. You will then enter the final amount into Column 2.
- Finally add all amounts from 5a, b, and c, and enter that number into 5d.
- You will then need to determine the total amount of Medicare and Social Security amounts. This is calculated based on a percentage of an employee's salary. Employers will pay for half of these taxes while the employee will pay for the other half. Those who are self-employed will pay the full amount.
- You can then make adjustments as needed. For example, you can subtract Social Security and Medicare from sick pay. You can deduct group-term life insurance premiums paid out to previous employees.
- After entering your total for all tax deposits on line 11, you can then subtract all deductions on lines 8 and 12e. If you find your totals on line 10 are greater than that on 13, you will owe money. Enter the owed amount on line 14. If the numbers on 10 are lesser than those on line 13, you will either be owed a refund or credited the refunded amount on the following quarter's tax return.
Be sure and follow this guide closely when completing Form 941. It is crucial that your business take the time to properly understand and file the form, as failure to do so can cause delays with your return, which can cause undue stress on your organization. For further information regarding the filing process of Form 941, consult the IRS website.
Tax Forms for Small Businesses
- Form I-9 (Employment Eligibility Verification) – this must be filled out for every person hired as it verifies the person is eligible to work in the United States. Note, there is also a new I-9 for 2020.
- Form W-2 (Wage and Tax Statement) – this must be filled out annually for any employee who worked during the preceding tax year.
- Form W-4 (Employee’s Withholding Allowance Certificate)– this is completed by the employee and provides the information needed to calculate how much federal income tax should be withheld from each paycheck.
- Form 941 – the federal tax return for employers that is filed quarterly with the IRS.
- Form 940 – this is the Federal Unemployment Tax Act (FUTA) return, which is filed annually with the IRS.
You can also stay informed, educated, and up-to-date with employer tax compliance, using BerniePortal’s comprehensive resources:
- BerniePortal Blog—a one-stop-shop for HR industry news
- HR Glossary—featuring the most common HR terms, acronyms, and compliance
- HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
- BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
- HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics
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